Silicon Valley, CA
Geeks. Founders. Startups.
The Internet Revolution.
Founding Partner & Sith Lord, 500 Startups
hell of a piece Sarah... nice job.
2 weeks, 1 day ago on Venture capital and the great big Silicon Valley asshole game
just to clarify: for our upcoming accelerator batch starting in April in Mountain View, our fund will be investing $100K per startup. in addition our incubator entity will charge a $25K tuition amount for the program that covers costs for our staff, office rent, and other services. the net amount to the companies will be $75K. we charge a program tuition largely to cover costs that allow us to support a large team and "live-in" costs for the companies.
in the past we have invested $50K per company and charged a $15K program tuition, for a net $35K. under the new structure, companies will receive more than double the previous amount (net $35K -> net $75K).
- Dave mcclure
7 months, 1 week ago on Conversation @ http://www.entrepreneur.com/article/232292
@coreycrossfield corey, we do support and fund all kinds of entrepreneurs out of our main fund (including several gay men & women founders, at least the ones we know of).
while we don't feel the need to "segregate" anyone, there is certainly benefit to having a supportive group of investors who feel / share some affinity with certain entrepreneurs.
that said you're certainly entitled to your opinion. diff strokes for diff folks.
7 months, 3 weeks ago on 500 Startups launches LGBT tech event series
agreed on 2 of your 3 predicted predictable reactions to the news... ;)
best of luck Paul & Sarah.
11 months ago on PandoDaily acquires NSFWCORP to double down on investigative reporting
- Dave "pig in the mud" McClure
1 year, 1 month ago on Let’s start a fight on the Internet
keith, that's just not correct.
we've funded over 500 companies in the past 3 years, at least 1/2 of which went thru incubators -- either ours at 500, or at YC, TechStars, AngelPad & others. while its certainly not the case that a majority of them raise Series A -- most of them are only raising $500K-$1M at first -- regardless we've seen a bunch of them move up to a $3-5M Series A within a year or two after.
while its true the car for Series A has gotten higher, it's also true that MANY other sources if capital are now available as alternatives. and altho it's tough sometimes, it's certainly easier than ever to raise capital if a company has good products and reasonable user / revenue traction.
happy to show you the detailed list of over 50-100 companies we've seen get to Series A in the past few years.
- DMC .
1 year, 1 month ago on A rare defense of venture capital classic
@LoraKolodny @DaveMcClure @Sarahcuda indeed, i'm leaving my PC now to go spend the afternoon at the pool with the kids :)
@damiansen however, sarah *is* smart... which is why i'm both surprised / disappointed in the perspective.
umm... seriously Sarah you really believe this?
you must be hanging out with too many blue shirts / khaki pants folks on sand hill road... either that or you're smoking something.
while the opportunity to raise shitloads of capital to grow companies is never going to go away, the organizations they raise it from, the process they go through, and the dilution they take as a result are changing pretty fucking dramatically.
* how many "traditional" silicon valley VC firms would bet over $250M on single company. (Google Ventures & Uber)
* how many "traditional" silicon valley VC firms spend millions of dollars building out non-investment resources to help with biz dev, corp dev, recruiting, etc (Andreessen-Horowitz)
* how many "traditional" silicon valley VC firms create micro-funds aimed at funding college students (First Round Capital, Founders Fund)
* how many "traditional" silicon valley VC firms create online platforms in only 3 years that are facilitating $150M in transactions per year at ABSOLUTELY NO CHARGE and are growing over 100% per year (Angel List)
* how many "traditional" silicon valley VC firms help over 100 companies per year get funded, on less than $50-100K each, and help those companies achieve Series A level valuations (Y Combinator)
* how many "traditional" silicon valley VC firms have funded over 500 startups in only 3 years, with over 150 of them from outside the US across 35+ countries. (500 Startups)
all of the firms mentioned above would likely describe themselves as "platforms".
now some of them may look like traditional funds managing billions (A16Z), and some of them may look like seed funds (FRC), but they sure as hell aren't the same structure & approach to venture capital as the folks who started the business 40-50 years ago... more importantly, they sure as hell aren't the same folks on Sand Hill Road who are doing the same old shtick for the past several decades.
now there's nothing wrong with being a traditional $250-500M fund with smart, connected people who sit on board seats and write a few $5-20M checks every year.... but to suggest that those folks are all our industry ever needs, and that these folks aren't facing SUBSTANTIAL DISRUPTION themselves in the past few year / next decade... well, i'd have to say you're nowhere near as smart as i thought you were.
happy to debate the topic in person, on stage, online, anyplace, anywhere... but you couldn't be more wrong.
founding partner & troublemake at "platform" 500 Startups
1 minor correction: i met Dropifi (from Ghana) in Rio de Janeiro (Brazil), while attending an entrepreneur conference there earlier this year.
however, i will be going to Africa for the first time next month... who knows, maybe we'll find our next investment there too :)
1 year, 3 months ago on Are you a female founder from the Middle East? 500 Startups wants to hear from you
so sad. jeffrey was a great guy, loving father & husband, funny prankster, and dedicated geek evangelist. I met jeffrey while working at PayPal when he was at eBay, and we remained friends thru the years, including watching Twilio get started, and his startup efforts at CodeLesson. he will be sorely missed. RIP :(
1 year, 3 months ago on Valley veteran Jeffrey McManus passes away suddenly
Francisco: i did *NOT* say you should put "all the money you have into startups"... what i was saying is that the US Govt's restrictions on investing (re: the JOBS Act) did not make much sense, given all the incentives we provide for people to buy houses, and the fiasco in the most recent financial crisis where many people lost all their money because they were buying a house that was far too expensive for them.
there are risks in investing in both housing and startups, and i wouldn't suggest anyone do either without appropriate time & effort to research those areas. that said, FAR more people jump into housing investments without any knowledge of the matter.
please don't take my tongue-in-cheek comments at Jason's show as financial advice, and please don't assert my perspective without checking with me first, thanks.
1 year, 4 months ago on What if things don’t work out for you?
fabulous post, and appreciate all the data & insights.
note: i'd suggest summarizing the top-line summary succinctly as "enterprise sales is hard -- and constrained by finding expensive & talented sales people".
a corollary to this might also be "if you can develop scalable channels of online marketing, you might have an easier time focusing on consumer and/or SMB customer targets, where direct sales is not the critical factor".
this is a critical observation, and one of the reasons 500 Startups focuses more on consumer & SMB businesses over enterprise -- they take advantage of the growth of online audiences, the dramatic increases in reach available via search / social / mobile platforms, and they also don't require anywhere near as much resource cost to scale.
this is perhaps an overgeneralization / re-iteration of your main points, but you could make both these points equivalently:
- enterprise businesses monetize well, but are notoriously difficult & expensive to scale, largely due to challenges in growing a direct sales team.
- consumer (and also SMB) businesses may or may not monetize well, but they are comparatively MUCH EASIER to scale, largely due to the efficiencies and advances in online marketing channels, and the relative ease of automation / low-cost compared to people-driven enterprise biz.
1 year, 5 months ago on Memo to this year’s YC class: It’s damn hard to build an enterprise company
(now go give your mom a call)
1 year, 5 months ago on Dave McClure, Risk Taker
and we are very happy to have you folks in 500 Startups too :)
1 year, 5 months ago on KiteReaders is at 500 Startups!
legit points on raise / capitalization / etc.
however I didn't think the international piece was on target, and since we've invested in 3-4 intl ticketing co's, we think that's got plenty of potential for traction.
1 year, 5 months ago on Raising money for the sake of raising money
Bryan: pretty sure EventBrite has come NOWHERE CLOSE to expanding in the international front based on the opportunities available in major economies across europe & Asia & Latin America. we have invested in ticketing startups in Japan, brazil, chile, and have other opportunities in emerging markets and developed markets as well.
whether or not EventBrite is over capitalized ill leave to other tea leaf prognosticators, but at least one of your arguments is faulty here. and I also have Ni idea why you think ticket master wint be surpassed -- there is most certainly a TON of unexplored market opportunity in the US, and regardless ticket master is absilutely vulnerable to competition.
perhaps kevin has raised money because he can, but it's not clear to me there isn't plenty of opportunity to grow into a larger valuation based on both domestic and international market potential.
other than those gross inaccuracies, the rest of your piece is quite thought-provoking.
just to clarify: the 500 Startups *Fund* invests the capital (typically $50K USD), and our 500 Startups Accelerator (separate LLC) charges btwn $12-24k per company, depending on # founders / non-founders participating.
as you suggest, net proceeds to the startup end up being $26-38K, which is actually more than most other accelerators provide total.
note: the reason we charge a program fee is to be able to cover our own costs and operate with larger staff and resources than most other accelerator programs. in future, assuming we have more capital under mgmt / more funds from other sources, we may do away with the program fees, however over the last 3 years it's been a useful way to cover our costs as we got off the ground. that said, it can be a challenge explaining to companies why we charge fees when most others don't.
thanks for providing the detail on how we operate. appreciate the correct info.
1 year, 5 months ago on This accelerator charges its companies $25,000. That’s just wrong — right?
congrats to Rick Baker & Niki Scevak -- StartMate is a terrific program, and 500 Startups has already invested in over 7 StartMate companies, and over 10 Aussie startups in total! #ozzieozzieozzie #oyoyoy!
1 year, 6 months ago on In cash-strapped Aussie venture market, a bird flies into a vacuum
@bgoldberg @DaveMcClure @orangerobot I was drunk, and being overly snotty / VC-like... also hadn't read it very closely when I first replied. after sobering up a bit, decided it was unnecessarily aggressive and deleted it.
1 year, 6 months ago on An acquisition is always a failure
ok, i've re-read this post again, and i get where jake is coming from... perhaps my initial knee-jerk reaction was incorrect.
while i still don't quite agree with a binary perspective of "big IPO = success / everything else = failure", i can certainly sympathize with the personal tragedy of selling your company to someone who doesn't always share your vision or values. (i had to sell my first business in the mid-90's, and it also wasn't a pretty situation).
(gee whiz, maybe i've become a little too much of an investor... and yes i do share the desire to create a great big company someday)
@orangerobot @DaveMcClure agreed that most acquisitions are not the dream that the founders had for the company... however to label them ALL as a "failure" is an extreme perspective that isn't accurate on either an economic, or on product / customer terms.
while i can sympathize with Jake -- i also had to sell my first company to an acquirer under less-than-ideal terms, and i also felt like i was selling my baby -- i would suggest that this perspective is a bit narrow around very personal and selfish goals for the founder, and not necessarily in the best interests of the employees or customers.
in any case, i agree and understand that not all outcomes should be measured in economic terms -- but neither should the outcome be considered binary as either a success or failure. there are many shades of grey inbetween.
thank you for being straight up and fair sarah.
hopefully not all ecommerce companies out there are buying customers and revenue on low-margin business, but as you state it has worked out for some and not for others. indeed it may be the case that many companies are being optimistic about long-term custom value, but at least for some with decent margins I don't think it will be the case for all.
in any case, my investor role here is likely less important than my personal role, at least to everyone who isn't one of my LPs. jody was a friend who I cared about, and altho we weren't the majority investor in the company, he was one of our portfolio company founders who we lost to a tragedy. for that, I'm truly sorry I wasn't able to pay closer attention to his needs, whether stated or unstated, and lend him a helping hand or ear when he needed it.
the situation is one I hope we all learn from, and can perhaps try harder to prevent in future.
jody: we miss you bro... you left us too soon.
1 year, 8 months ago on Ecomom’s aggressive discounting culture should be a cautionary tale for all of ecommerce
so very sad :(
1 year, 8 months ago on The startup community mourns the loss of ecomom founder Jody Sherman
congrats Mickey! sounds like a great thesis.
(happy to be co-investor in ContaAzul with you already :)
1 year, 9 months ago on Ribbit launches $100M fund to capitalize on perfect storm in financial services
1 year, 9 months ago on Launchpad LA doubles down on accelerator, now offering companies $100k
great stuff! congrats Sam Teller, Mark Suster, and other folks involved :)
happy new year michael :)
1 year, 9 months ago on Shared wisdom: Year-end thoughts from some of the industry’s best
smart & experienced team, beautiful & effective product, large market opportunity, clear business model.
one of our easiest investment decisions.
1 year, 9 months ago on Glyder’s social marketing tools give small businesses a fighting chance
much respect & props to bowei... he's planning to visit almost every interesting tech metro on the planet!
500 Startups is psyched to support the WSR effort & look forward to hearing more from tech startups all over the world!
1 year, 9 months ago on Bowei Gai goes in search of the startup world outside Silicon Valley
this is excellent. especially like 10.
nice job Sanjay & James :)
(altho I think 4/5/6 are all the same thing)
1 year, 10 months ago on Beyond the install: 10 keys to driving sustainable mobile user growth
@rekatz doesn't usually happen. if they're "killing it" then usually they have a viable raise happening. if not then something else likely going on.
we occasionally will put more money in when we think things are working but investor market hasn't decided if there's enough traction yet, but generally we prefer other larger / downstream investors make those calls first.
our fund isn't large enough to prop up companies that are stuck between incubation & seed, or seed & series A, and it's probably not a good investment thesis to be doing so anyway.
companies that are performing usually are able to raise (at least some) money. 500 doesn't typically do bridges.
1 year, 10 months ago on The Series A crunch is hitting now. Have we even noticed?
good analysis, and a 20% avg survival rate to series A might even be a little high. I'd guess optimistically in our portfolio the # might be as high as 30-35%, but prob not much higher.
still, I don't think this is a "problem" per se, it's just that most things fail. the good part of this is we aren't generally wasting Series A dollars ($2-5M+) figuring out whether things fail, now we are only wasting $50-500k, or maybe $1-2M top end, to discover weak product, weak teams, weak execution, or weak marketing. it's certainly not a bad thing that weaker startups don't get a Series A deal, it's a GOOD thing.
in our portfolio, we model that 5-10% of our deals have 10-20x potential or better (aka Wildfire, Twilio, SendGrid, TaskRabbit, etc) and perhaps 15-30% have 3-5x potential or better. portfolio models should be built on very conservative expectations, not 100x or better.
if incubators & seed funds have these expectations, they have a chance for success.
great story. naval is an incredible innovator, and Angel list is making some serious change in venture investing.
1 year, 11 months ago on How Naval Ravikant went to Washington and changed the law
good observations. in fact, it's surprising given how much we rip on VCs that the LPs haven't gotten their fair share of criticism.
aside from Bill Gurley @ Benchmark (surprising source, really) laying the smackdown on LPs, i rarely see it... especially from VCs.
while it's not likely good politics for the industry to criticize its funding sources, they are likely in need of a serious wakeup call.
(hmm, maybe it's time for me to make some new frienemies ;)
1 year, 11 months ago on That venture capital shakeout is still taking way too long
smart. lots of potential in LA. go @sacca!
1 year, 11 months ago on Lowercase Capital is bullish enough on LA tech to launch a dedicated fund
nice map Pando :)
1 year, 11 months ago on 500 Startups’ latest batch of companies is so international we had to map it out
@medinism umm, 500 is an investor in WePay but not PoundPay.
2 years, 1 month ago on It’s Starting to Dawn on PayPal: We Might Really Be in Trouble
@marksbirch perhaps but I think that's changing quickly. look for the platform companies to expose / consume merchant-focused APIs & in particular enable more b2b lead-gen opportunities to provide paid access to the companies already on those platforms. in the short-term you're right they'll be focused in acquisition of other startups, but eventually they need to make money.
2 years, 2 months ago on What’s Still Holding Back a Small Business Software Revolution
actually, if the second tree existed there wouldn't be a problem... rather, the correct analogy is that the smaller acorns are plentiful, but spread thinly across a vast array of very small trees.
the real opportunity is that (hopefully) in the near future, several growth forests are springing up around SMB platforms Yelp, Groupon, and Living Social (or their likely acquirers, which might include large consume platforms Facebook, Google, Amazon, & others). in addition, there are a number of great new startups that are also working on these issues as well.
agreed we aren't there yet, but we are closer than most folks think. call it another 2-4 years, I'd say. more on this topic later.
i've met @niubi in China several times, along with several other US & UK expats mentioned here, and agree he's an amazing person who has significant insights into what's happening in the country. While i might not always agree with his & other expat-in-china perspectives, the [anonymous] criticism by SinoSam in the comments here seems a bit over the top. Bill is well-informed, thoughtful, and has experienced china as a local for most of the past decade (and before that as well). His tweets & re-tweets are likely one of the most visible channels non-sino speakers have to understand what's going on in the country, and to belittle his tweeting as a lack of awareness or engagement with the local culture is rather clearly uninformed, or perhaps intentionally misdirected. More likely than not, the smoke coming from the heated commentary here is strong evidence there is indeed a fire in Bill's belly worth paying attention to. It's my sincere hope people like Bill will help attract interest & understanding from more folks in the US (and elsewhere) to come to China themselves and get to know both the country and its people better. -DMC
2 years, 2 months ago on Bill Bishop: The Invisible China Hand
love this 1:
>>"Relative to competition in the Valley, McClure’s early results haven’t turned too many heads"
nice. damned by faint praise, eh? then again I already admitted to being a L0S3R on my blog.
kisses right back atcha Michael. I'm tempted to say that "relative to the tech blog competition in the valley" Pando Daily hasn't turned many heads either -- TechCrunch is roundly kicking your asses, not to mention a few others are too -- however, I believe YC and TC both started around the same time in 2005, and no one took either of them seriously the first 2-3 years. since they each have a 5-6 year head start on Pando & 500 respectively, maybe we should both be optimistic that our Dropbox & AirBnb are still in front of us.
in any case, I think Howard is a smart guy, and let's give him & StartEngine a few years to show some progress before we drop kick him into the gutter along with my sorry ass & 500.
damned by faint praise
2 years, 2 months ago on LA Rapid Accelerator StartEngine Reveals Mixed Early Results, Looks For Gems in its Third Class
thanks for the link... altho to be clear, being a VC isn't really the tough part. being human and trying to be an entrepreneur is the scary stuff. anyway, appreciate the hat tip :)
2 years, 3 months ago on 500 Startups’ Dave McClure Talks About the Pains of Being a VC
shit. yeah, knew that soundbite was gonna headline per everything else I said... sigh.
anyway, the ambassador was very nice to us (turns out he's a rock collector geek / amateur gemologist), even if I was being the typical overbearing & arrogant gringo.
regardless we had a wonderful visit to Mexico, and the investing opportunity in tech startups there is absolutely huge.
2 years, 5 months ago on Dave McClure on His Attire at the House of America’s Ambassador to Mexico | PandoDaily